Qualified agents can help choose insurance

For small-business owners, choosing an insurance broker, like paying taxes, is an inescapable fact of life. Every enterprise, regardless of size, type, product or service, is exposed and at risk from theft, accidents, malpractice, fraud and a myriad of other threats as long as the meter is running and the doors are open for business.

“Insurance is a commodity that everybody hates but everybody has to have,” said Thomas Adderhold, CEO and president of Preferred Insurance Group in Duluth.

The basic guidelines for choosing an insurance partner fall under the common sense category. The primary objective is finding an experienced and knowledgeable broker or agent with insight into both general business insurance and your small business in particular.

“Most of the advertising we see is from insurance companies whose agents write mainly personal lines of insurance,” said Bill Wilson, associate vice president of education and research for the Independent Insurance Agents & Brokers of America (IIABA).

“They often lack the expertise and resources to assist business owners in insuring or risk managing their exposures to loss,” Wilson said.

While many brokers dabble in commercial lines, such as apartment complexes, condo associations and small retail businesses, the vast majority of business insurance is written by independent insurance agents who simultaneously represent multiple insurance companies, sometimes as many as a dozen or more.

“Some insurance companies target specific industries like convenience stores, quick printers and restaurants, and they have developed very specific products for these industries that may provide greater value than standardized off-the-shelf insurance policies,” Wilson said.

According to Wilson and other experts, the only way to compare policies is to read them, which would present any small-business owner with a daunting task in terms of the time and effort required to evaluate the merits of innumerable policy terms and provisions. When minor differences in coverage can result in huge exposures to uncovered claims, the best plan is to call in the professionals.

“Engage the services of a good, qualified agent with extensive expertise and experience in insuring different types of businesses,” Wilson said. “They will assist you in evaluating your exposures to loss, and match your business risks with the best product for your unique circumstances.”

Agency members of the IIABA, which are branded Trusted Choice, typically offer policies tailored to a wide array of small businesses. Trade associations are another good source for contacting insurance agencies that specialize within a particular industry sector.

“Insurance companies and independent agents all have different sweet spots,” said Aubie W. Knight, CEO of Independent Insurance Agents of Georgia Inc., the state affiliate of the IIABA.

Most insurance representatives are likely to avoid operations that involve extraordinary risk, such as transportation, heavy manufacturing and establishments where alcohol is served. Some industries, such as aviation, long-haul trucking and medical malpractice, require insurance agents with very specialized knowledge.

When selecting an insurance broker, experts stressed the importance of seeking out references from owners of similar businesses, and taking adequate time to perform due diligence.

“No matter what business you’re in, you have to sit down with an insurance professional who understands what your goals are and what you want to accomplish through your insurance and risk management plan,” Knight said.

From a regulatory standpoint, the Office of Insurance and Safety Fire Commissioner provides a wealth of information on rates, rules and regulations, as well as performance evaluation criteria, such as whether an insurance agency or broker is properly licensed and certified. In some cases, the information includes continuing education courses taken by agents.

No matter how satisfied a small-business owner might be with an existing insurance plan and partner, inevitably the time will come to re-evaluate the relationship between the business operation and its coverage requirements. Most experts recommended conducting an insurance review on an annual basis.

“A good agent will sit down with you and use a checklist or proposal system to re-evaluate your exposures to loss and review any changes in owned or leased property, business operations, and other factors,” Wilson said. “It doesn’t hurt to solicit competitive quotes from other agents, but keep in mind that you may not be comparing apples with apples.”

Wilson noted that sticking with a particular agent or insurance company offers qualitative benefits in terms of breeding value and improving a policyholder’s bargaining position on claims when coverage is questionable. Also, an independent agent can provide comparative rates among the insurers he or she represents.

How To: Insurance

Top tips for choosing a broker and policy

Ask local business owners and get referrals from them.

Check with industry-specific trade associations for recommended agencies and settlement claims history.

Work with specialist brokers.

Compare coverage and rates (typically by consulting with an independent agent).

Package deals (e.g., a Business Owners Policy or BOP) usually offer the best value.